A sort of reader wrote:
If you want to explain the difference between a recession and a depression, or why it took seven years for the economy to get back to its previous highs after 2008, then go ahead. I am all ears.
Aside from not understanding how long it took to re-reach its pre-recession peak in 2007 (it took only 3 years instead of 7), readers don’t seem to understand that “depression” doesn’t have a fixed definition in economics. As far as I’m concerned, there are two depressions in U.S. economic history terminology, but I’m willing to be corrected. Here are two photos that I am familiar with. The first is the “Great Depression.”
figure 1: Real GDP index (black), NBER-defined recession dates from peak to trough shaded in gray, dashed red line for the start and end of the Great Depression. resource: Gordon Cron (2010)National Bureau of Economic Research.
Investopedia sets the Great Depression to end in 1941, while the Wikipedia text sets it in 1940-41.
another”Great Depression“Related to the Panic of 1893.
figure 2: Real GDP in millions. 2012$ Logarithmic scale (black), NBER-defined recession dates from peak to trough shaded in gray, Great Depression start and end dates at red dashed lines. Source: MeasurementWorth, National Bureau of Economic Research.
Now, is there any comparison between the Great Depression and the Great Depression? I’ll let non-visually impaired readers decide.
image 3: Logarithmic real GDP normalized to the 2007 Q4 peak (blue) and normalized to the 1929 Q3 peak (brown). Source: Bank of East Asia, Gordon Cron (2010)NBER, and the authors’ calculations.
Thus, at the trough associated with the Great Recession, output was 3.9% below the peak (log term).For the Great Depression, a trough is 38.6% below the peak.
I’m going to take a risk and assert that this particular reader himself has a very specific definition of “depression” (I don’t know what he means by “depression”).
I am often amazed at how willing some people are to boast when they know very little about the relevant data.
